How Much Money Do You Need To Start an Assisted Living Business?

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Starting an assisted living business can feel like a big step, and the first question most people ask is, “How much will this cost me?” I’ve been down this path myself, and today I’ll walk you through the four main ways people get started. By the end, you’ll have a clear sense of which option might fit you best.

Want the full breakdown? Watch the video below👇

The Lean Startup: Renting a Home Keeps Your Costs Low

With this route, you lease a house instead of buying one. You don’t need a big down payment, which makes this one of the cheapest ways to start. Y

our main costs will be having money in reserves for your big expenses: rent, staff, food, insurance, and utilities. Staffing will be your biggest expense.

I always suggest you save 3 to 6 months of operating capital. This gives you peace of mind while you fill the home with residents. When you run your numbers with my free underwriting calculator, you’ll multiply your monthly costs by the months of runway you want.

Most people need about $50,000 to $80,000 to start this way.

Buying an Existing Facility Helps You Make Money Faster

This is one of my favorite ways to get started because the home is already licensed and usually already has residents. That means your pathway to profitability is shorter and much less stressful.

This is how I got started, and I’ve seen this work for many beginners.

If you use an SBA loan for the purchase, plan on 15–20% down. On a $1 million property, that’s about $150,000 to $200,000.

A big bonus here is that you can often add 2–6 months of operating capital to the loan. When I learned this, it made the whole process so much easier.

Yes, this option costs more upfront, but you also get the real estate and a business that’s already working.

💡 Add operating capital to the SBA loan if you can.

Buying a Home and Renovating It Takes More Time and Cash

Some people prefer to buy a regular home and turn it into an assisted living facility. I tried this path at first. I talked with city planners, learned about zoning, and walked through several homes.

Pretty quickly, I saw how many renovations were needed—sprinklers, ramps, wider doors, ADA upgrades—and those renovations can add up fast.

If you decide to go this route, you'll likely need to use a conventional loan to purchase the home which is likely a down payment of 20–30% down.

On a $500,000 home, that’s about $125,000 down. Renovations may add another $50,000 to $250,000, depending on what the home needs. So your total could land between $175,000 and $300,000.

This path gives you control and lets you design things how you want, but it can also come with surprises and delays.

✅ Talk to your fire department early so you know the required safety upgrades to home.

Building a Facility From the Ground Up Is the Biggest Investment

If you want something completely custom, you can buy land and build a facility designed for assisted living. This is the longest and most expensive option, but you'll also get exactly what you want.

A land-plus-build project typically ranges from $1 million to $3 million+.

You’ll need architects, engineers, zoning approval, and early coordination with state licensing. It can take 12 to 24 months before you can welcome your first resident.

The upfront cash is also high. For example, a $2 million project with 20% down payment is $400,000.

But the long-term payoff can be great if you want a modern, purpose-built home.

📋 Expect long timelines and higher holding costs before revenue.

Wrap Up

No matter which path you choose—renting, buying, renovating, or building—your goal is the same: make sure your income can cover your “WIFED” expenses (wages, insurance, food, energy, and debt service), and get you the profit you are looking for on the back end.

When you run the numbers clearly, you’ll know which option truly fits your budget and your long-term vision.

If you need help creating a business plan for your assisted living business, check out the Free Business Plan Checklist.

And if you’re ready to figure out your next step, join me for the next Roadmap Challenge where I’ll walk you through how to get started.

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Show full transcript 👇

Transcript

00:00:00
Today, we're breaking down the big question. How much does it cost to start an assisted living facility? Hey friend, I'm Brandon Gustafson, and I help first-time assisted living entrepreneurs launch profitable, purpose-driven businesses in 12 months, creating prosperity, purpose, and peace in their lives. And make sure you get over to assisted livinginvesting.net so you can see how I can help you out a little bit. And stick around until the end of the video. I have a special invitation to

00:00:23
help you get started on your assisted living journey. All right, let's get into it. Now, the cost for how much it takes to get into assisted living kind of depends on the way that you want to go about this. You know, which option are you going to go? So, I'm going to try to break these down for you in a way that is really easy to digest and maybe gives you an idea of, okay, I'm going this route. This is going to help me make that decision. So, option number one, the lean startup. This is where you're doing rental

00:00:56
arbitrage um and doing that type of a model. My friend Serge Leescu, this is how he got started in Arizona. Maybe you've heard of him. Encourage you to go watch his channel. He has some incredible stuff on there about his journey and and he's he's got an incredible group over there. So, make sure you go check him out. But in this model, you are leasing a house instead of buying it. So, you don't have to put in the money upfront to buy a home, which is great. Um, and your biggest

00:01:22
costs in this model are going to be your rent, which is a big one, your staff, which is the biggest expense that you have in assisted living. It will take up 50 to 70% of your total expenses are going to be related to your staff. Your food and getting your pantry all set up. Um, from that standpoint as well, you're going to need to also worry about insurance. And you also want to be looking at at making sure you have your utilities taken care of when you get into this. Now, when you do this, I

00:01:49
would encourage you to have three to six months of operating capital saved and in the bank. It just gives you peace of mind. It helps you know how you're going to move forward. So, you want to make sure you do your underwriting. Go to assisted livinginvesting.net. It's the big blue blocks in the top right corner. Grab my free underwriting calculator. It's going to help you figure out, okay, how much is it going to cost me to operate this business? So, that calculator is there to help you figure

00:02:15
that out. Make sure you go grab it. And when you figure out, okay, it's going to cost me 15, 20, $25,000 per month, whatever the number is, then you want to just multiply that by 3 to 6 months to see, you know, how how comfortable are you in doing this. And the reason why you want to do that is because when you go this route of leasing a home, you don't have any residence inside the home. So, the more of a runway you can give yourself, that's going to benefit you quite a bit. So, that's really your

00:02:42
startup cost. Maybe there's going to be some upfront, you know, renovations and things that go on in the home. Maybe you can convince the landlord to do those for you. Just kind of depends. But ultimately, your upfront costs are going to be more associated to the amount of money that you need to give yourself a runway with the way that you're going to get operating capital. I would say typically you're going to need $50 to $80,000. It is what I would suggest you get. Now, you could get this through a

00:03:08
loan. You could get a small business loan. doesn't need an SBA loan. But with the SBA, there's actually what's called an SBA Express loan. These are up to I want to say 200,000, but it could be a little bit off. Um, but it's a chunk of money that you can use that is kind of without assets, maybe a higher interest loan, but they do go a little bit faster. It's a little bit easier to get. So, that could be an option that you go through. Or you could just go to your local bank and credit union and see what

00:03:33
other small business type of loans they have available. Make sure you have a business plan so you can run through that and get that to them. I actually have a free resource for you there as well. Go to assistedl livinginvesting.net/bp checklist to get your free business plan checklist. We'll have links down below for you on that. So, make sure you go and grab those tools. It's going to help make this uh work for you. Now, the positives of going this route when you're renting something, going this

00:03:58
rental arbitrage route is it's going to be cheaper and probably faster for you to get in and test it out and make sure it's working for you before you just dive all the way in and get started. Um, so that's something that you should take into consideration. Why you might not want to do this model is you don't own the real estate. And there's a huge benefit to being able to own the real estate and to sell that at some point. There's tax benefits that can come from owning the real estate. Uh it just gives

00:04:26
you a little bit more flexibility. Maybe you need to tap into the equity at some point along the path. So, there's a lot of benefits in doing that. But if you don't have the money and you can't get into this cuz you don't have the money for a down payment on a home, then renting can be a really really great route for you to go to get started. Option number two is going to be buying an existing facility. And I would suggest doing this with an SBA loan. I think it's one of the best ways to get

00:04:51
into assisted living. So, in this situation, you're going to purchase a facility that's already operating. It's already licensed. It has residents in it, hopefully. Sometimes they don't. Sometimes it's somebody just licensed it and now they're selling it or even leasing it. I've seen that before. But what you're trying to do in this situation is you want something that is operating that's going to be profitable. Your pathway to profitability is reduced so much. it just becomes so much easier

00:05:19
to become profitable when you buy something that's already existing, already has systems in place. It just makes your life a lot easier. It's how I got started. What I would suggest that you do as you get into it, I think it's the best way to get into assisted living. I I really do. Could be hard to find properties, um, but I think it's the best way to get into assisted living. SBA loans, if you're going to go that route, typically will be 15 to 20% down. Now, you might have a lender that

00:05:44
tells you, "Oh, we can do it as low as 10%." and and they could like technically yes, it's it's it's certainly possible, but it's going to be dependent on the amount of equity that exists in the home that's going to be used as collateral and hopefully that's the facility you're buying, but it may also require some extra equity with personal residence or other investment properties. So, you want to make sure that you're aware of what that's going to look like. I would probably plan on

00:06:08
it being 15 to 20% as your down payment. So, million-dollar home, you're looking at $150 to $200,000 as a down payment is what you're going to be looking at in in that scenario. Okay. Now, you can also something that this is like a pro tip for you. When you are doing an SBA loan, you can actually roll that operating capital that we just talked about when we're talking about rental arbitrage. You can roll that into your SBA loan. So, you can ask for two to six months of operating capital. You just have to

00:06:39
justify it. Again, this is why you need a business plan. This is why you need solid underwriting. So, you can say, "Yes, home's a million dollars. I actually want a million and I don't know, 1.1 million or a million dollars and 60,000." A million60,000, however you want to say that. And this is why XYZ, I I need it because we want to make sure that we can make payroll. We need to buy a bunch of food for our pantry. We have some high expenses with our license and our insurance upfront. um

00:07:07
you want to be putting those types of things into your business plan. And when you request that, as long as you do it upfront, lenders are probably going to be like, "Yes, this is actually a really good idea. It's going to allow them to be successful." Lenders want to give you money. They want you to be successful and they will give you opportunities to do that. You just kind of need to find out how you're going to take advantage of them. Okay? So, really important for you to do that. But you can roll that

00:07:31
into your SBA loan. that $60,000 that you are going to need for you to have operating capital that we just talked about in rental arbitrage, you can just get that in a loan. So, yeah, maybe you need to do a $200,000 down payment, but you don't have to have an additional $60,000 for operating capital cuz you just asked for it in your loan. And so, it's going to make it a whole lot easier for you. That's one of the pro tips that I learned as I went through this process. First facility we bought, I did

00:07:57
not do this. Um, and it was difficult. second facility. We did this and oh my gosh, it was so much easier. So, I cannot encourage you enough to go this route when you are trying to get the funding that you need to launch your assisted living business. The pros of doing this and and going the route of buying an existing facility are obviously you can start faster. Your pathway to profitability shrinks significantly and it's going to let you get in there. You also are going to have that real estate as an asset because you

00:08:24
are purchasing it on an SBA loan, which is an incredible opportunity for you. Um, maybe the cons here, it can be a larger upfront investment compared to going the route of leasing. So, it's something that I want you to be aware of. It can cost a little bit more. When buying an existing facility, the cost to start is very much driven by the value of the real estate that you're purchasing. That's what you want to be aware of when it comes to that. Now, let's talk about option number three,

00:08:49
and this is buying a home and renovating that home into an assisted living facility. Now, this was the route that I intended initially for me to get started. I live in Utah. I started looking at homes that I wanted to start with and I started looking just online and I was like, there's too many homes here. I need to figure out which area I want to get into. And so, I started talking to city planners. If you'd like to learn a little bit more about what it's like working with a city planner

00:09:16
and figuring out the zoning process, type zoning down below and I can do a video that is specific into that and and what that process was like for me. Um, as I started looking at homes, uh, what I found is, man, there's going to be a lot of renovations that need to go into this home to get it ready for assisted living. This could be quite a bit of money. So, what you're going to find when you do this is you're going to have to have a down payment for your home. Um, and when you do this, because it's

00:09:42
an investment property, you're going to be needing to probably do a conventional loan. You potentially could do SBA, but there's not a business attached to it, so SBA is not going to be as friendly to it. So, you're probably going to need to do some kind of a conventional loan or creative financing options to look at. And that can be because it's an investment property, 20 to 30% down when you're trying to get into this. Plus, you're going to have to do major renovations, and you may or may not be

00:10:07
able to include that in the loan. I would say probably not. So, you're going to need to account for that as well. Um, so some of those big renovations that you might need to look at are going to be, you know, sprinkler system renovations to make it more accessible, ADA compliant, for example, just other safety upgrades that you need to do. And these can be 50 to a couple hundred,000 in renovations. Now, you might be lucky. Um, I actually looked at a home in Riverton, Utah at one point that we're

00:10:35
going to do a conversion and we talked to the fire department and they said, "You don't need to do a fire suppression system here. Fire extinguishers are going to be fine." And fire suppression system $40,000 versus buying 10 fire extinguishers for a couple hundred each. That's a no-brainer, right? It's $2,000 versus $40,000. Sign me up. I think we're good. So, you want to make sure you understand what's going into that to see what renovations might need to happen and then figure out how much

00:11:01
those are going to cost because they can be costly. So, you need to be aware of that. The other thing when you're buying a home and renovating it is you're going to have longer timelines. It's just going to take you a little bit longer to get this thing up and running because of the renovations that you may have to do. Now, when you buy an existing facility, hopefully you don't need to make renovations. We actually had to for one of our facilities. uh we had to make some adjustments to a bathroom, but it

00:11:25
was done in about a week. Whereas, if you've got to coordinate to get fire sprinkler system in and you've got to widen doorways and you got to create a ramp, um those things, you're going to have to juggle a bunch of contractors. Maybe you have to hire a general contractor to do it. There's just a lot of headaches and so that's something you need to be aware of. Doesn't mean you shouldn't do this. I think you can be very successful with it, but I want you to be aware of it before you jump into

00:11:49
it because it's something that you need to take into consideration. So, how much does it cost going this route? You're going to be doing a down payment. Let's just say, hey, you're probably going to be able to get something that's maybe a little bit less than a million dollars because there's not an attachment to it. Let's say that it's a $500,000 home. Okay? Your down payment is going to be at 25%. So, let's just do some quick math here. 25% out of 500 is $125,000

00:12:13
down payment. Plus, you're going to have to have the renovation money. So, that could be anywhere from 50 to $250,000 potentially. It just kind of depends on your situation. So, in this scenario, you're looking at maybe $175 to $300,000 in liquid capital upfront to get started. Now, the pros here with going this route is you can customize this. You're going to have to pay for it um through renovations, but you can customize the property to get it a little bit more how you want it to be.

00:12:38
Um you get to create the culture from the beginning, which is really great, and it's probably more affordable than new construction because you have the bones of the house there that that already exists. You're also going to get the real estate, which is great. The cons for reasons why I wouldn't do this is renovating surprises. You never know what's going to happen. Maybe you knock down a wall and something bad happens there or you can't get the permits in time and it delays things or zoning.

00:13:04
There's zoning challenges. There's delays. There's a few things in there that's just like there's potential for a lot of headaches. Do I want to do this? I think it's a great way to get going. That's just something I want you to be aware of as you start looking into this. Is it going to fit for how I want to get into assisted living or not? And the fourth option that I want to go over with you is buy building from the ground up. So in this scenario, you got to buy the land to go build this build a

00:13:31
facility from scratch. But and and I would say typical land plus build is going to be a million to 3 million because if you're doing this, you're not going to be building a a small 5-bedroom home. You're going to build this purposefully for assisted living. It's going to be big. It's it's going to be really nice, which is going to be awesome, but it's going to be costly uh for you to get there. And you've got to take into consideration not just construction materials, but talking to

00:13:56
an architect and engineers and getting everything in place so that you can move forward with this. You need to have all of those things in place. That's going to depend on the size and the geographic location and how much those things are, but it's it's going to be a pretty hefty sum when you go through this. It's also, so I mentioned you're going to need our architectural plans. You're going to have to get zoning approval as you go through it. Uh, when you're building

00:14:17
something new, uh, something you need to make sure you have in place, state licensing, you're going to have to do that from the beginning and kind of work with them and be in conjunction with them. It can take 12 to 24 months to get this thing off the ground and where you want it to be. So, there's a long lead time that you need to be aware of. A lot of holding costs are involved there. It can be stressful. can have a long timeline, but if you do it right, the reason you want to do this is you have

00:14:46
it exactly how you want it. It is customuilt. It is perfect for assisted living. Uh people love it. It's great. It's a modern design. It's a long-term asset. It It's going to be great. It there's a lot of upfront time that takes to get there. And the way that you're going to get into this is probably it's going to be expensive. You're going to maybe need to do a construction loan, SBA. You can actually do SBA. I was talking with somebody about this a little bit ago and and he actually was

00:15:11
pre-approved for a mill $4 million with an SBA loan to build something from the ground up. So, you can do this going that route, but you are probably because it's just a higher amount that that's going to cost you to get into this. Um, your liquid capital that you need access to is going to be pretty high. So, if we're doing a $2 million project and you need 20% down, that's $400,000, right? So, it's it's just going to be a little bit more. And there there's a lot that

00:15:37
goes into it. So, you just got to be aware of that. But, like I mentioned, you can get this exactly how you want it. And for some people, it is worth the time and worth the money to get something that is specific to assisted living. Now, the reason why you would not want to go this route is it takes a long time. Um, it's the highest cost to get into, the longest timeline, and it is probably the highest risk before revenue. Um, by that I mean you've got a lot of holding costs. It could take you

00:16:04
a while to be generating enough income for you to feel comfortable that cool, I'm going to be profitable. You might have to wait a year or two before you get to that point where you open the doors and then you start bringing in residents. So, you have to just kind of be careful with that. If you're okay with those holding costs and you're really excited about this, then maybe it's the right way for you to get into it. If you have the the money up front for you to get into it, it can also be a

00:16:28
really great opportunity uh for you to go. So now what I do want you to know uh when it comes to launching an assisted living business just absolutely key for you to know as you are getting started in this business. There are operating expenses no matter where you're looking through this that you need to be aware of. Um if you'd like to have a deep dive into these type in wife down below. Um these are the expenses that you are married to. So I call them the wife expenses. I'm going to run through them

00:16:59
really quick here. You have your wages, you have your insurance, you have your food, you have your energy or your utilities, and you have your debt service. Those five expenses are going to make up 80 to 90% of your operating expenses. And you need to make sure that your potential for income is going to cover those expenses. That's why I encourage you to go grab the underwriting calculator at assistedlivinginvesting.net so you can just try to figure out is this going to be profitable or not? And

00:17:27
then if it is, then then great. But, uh, if you if you're not going to be profitable on whichever of these options that you think you want to go with, you're not going to have the income because you don't you can't charge high enough prices because it's not nice enough or you don't have enough residents coming into the home because it's just too small and you can't cover those expenses. You're not going to make money. So, you need to make sure that you are aware of what those are going to

00:17:51
look like. Plus, this is how you figure out what those two to three months of expenses are. you figure out the wife expenses and then you just multiply that by two, three, six, whatever, however many months you want. That's how you're going to figure out what that's going to look like for you. Okay? Make sure you go grab that assisted livinginvesting.net. It's going to help you out a ton as you get into it. So, there you go. Uh went through the four different options. Leasing from the

00:18:15
beginning, I say I would say you can get into it for $50 to $80,000. Um and some of that you might be able to secure with a loan and and then it might even be less than that. And so it's a really good option for you to get into. You could buy something that's existing, either a home and renovating it or buying a an existing facility, and you're probably looking at somewhere closer to like 200, $200, $300,000, or you could go the the the big route and go and build something on your own, and

00:18:43
then you're looking at 400, $3 million, just kind of depending on the scale of what you want to get into. It just depends on your resources, your risk tolerance, and your long-term vision. Where do you want this to go? And once you figure out what those things are, it's going to help you out a ton. Now, I mentioned at the start of the video that I had a special offer for you. And it's actually a roadmap challenge. And in that roadmap challenge, we actually go through this process and I help you

00:19:10
figure out which of these is going to be best for you. I have like a little mini quiz that you can do inside the challenge. It's going to give you some guidance on which of these options is going to be best for you. If you're struggling trying to figure this out, go to the challenge. If you go to roadmapchallenge.com, you can find out when our next one is coming up. It's it's coming up soon. I would love to have you in there. So, make sure you go check that out. Roadmapchallenge.com.

00:19:30
It is a 5-day live challenge experience. We're doing the work. It is not a webinar or a sales pitch or anything like that. It is work and we do it together. So, make sure you go check it out. roadmapchallenge.com. Would love to see you there. If you like this video and you found it helpful, make sure you like the video, subscribe, and ring the bell as well so you get notified every time we put out content like this. I go live on Tuesdays, we put out content on Thursdays. I love helping and coaching people like you on their

00:19:56
path to launching their assisted living business. Make sure you go check out the profitable assisted living investing book at the ALI book as well. It's a book that goes through my five faves process, the focus framework of how to launch an assisted living business. Go grab that. It will help you out as you're trying to launch your assisted living business and help you be successful. Curious about assisted living? At Assisted Living Investing, I help first-time assisted living entrepreneurs launch profitable,

00:20:20
purpose-driven businesses in 12 months, creating prosperity, purpose, and peace in their lives. And remember, it doesn't take a lot, just a little bit. Just keep going step by step by step. And I promise you, if you do, and you are consistent and persistent, you're going to be successful. Thanks for watching and have a great day.

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